Search Results
Journal Article
Bank Profitability Rebounds despite Compressed Interest Margins
While traditional sources of U.S. bank revenues have struggled during the pandemic, overall bank profitability has soared. This unusual deviation is largely explained by a substantial decline in banks’ loan loss provisions. Extraordinary policy measures undertaken by the Federal Reserve and U.S. Treasury aided a rebound in financial market conditions and, in turn, reduced projected loan losses. However, this effect is likely to be transitory, suggesting an uncertain future for bank profitability.
Working Paper
Sectoral Loan Concentration and Bank Performance (2001-2014)
Sectoral loan concentration is an important factor in bank performance. We develop a measure of sectoral loan concentration and study how community bank performance and the size-performance relationship vary with loan concentration and changes in loan concentration. The size-profitability relationship varies with concentration in the residential real-estate (RRE) sector. Higher RRE concentration is associated with lower returns especially for larger community banks?banks with assets totaling a billion or more. Concentration in other sectors, such as agriculture and commercial real estate ...
Working Paper
Credit scoring and loan default
This paper introduces a measure of credit score performance that abstracts from the influence of ?situational factors.? Using this measure, we study the role and effectiveness of credit scoring that underlied subprime securities during the mortgage boom of 2000-2006. Parametric and nonparametric measures of credit score performance reveal different trends, especially on originations with low credit scores. The paper demonstrates an increasing trend of reliance on credit scoring not only as a measure of credit risk but also as a means to offset other riskier attributes of the origination. This ...
Working Paper
Competition and Bank Fragility
Journal Article
Corporate response to distress: evidence from the Asian financial crisis
This paper provides a comprehensive examination of corporate responses to financial distress during an economy-wide crisis, specifically through the restructuring of assets (through asset sales, mergers, or liquidations) and/or liabilities. Using firm-level data from five countries hardest hit by the East Asian financial crisis of 1997-98, this study contrasts the effects of financial and corporate governance variables on restructuring choices. The study finds that, during a crisis, financial constraints and corporate governance each have a large effect on the restructuring choice.
Journal Article
Assessing Market Conditions ahead of Quantitative Tightening
Quantitative tightening (QT)—the reduction in the Federal Reserve’s balance sheet—will transfer a significant amount of Treasury and agency mortgage-backed securities to investors. This transfer will be larger than the first endeavor with QT in 2017 and will occur at a time when financial markets are strained, suggesting this round of QT has the potential to be more disruptive compared with the benign start to the 2017 runoff.
Journal Article
Global European banks and the financial crisis
This paper reviews some of the recent studies on international capital flows with a focus on the role of European global banks. It presents a revision to the commonly held ?global saving glut? view that East Asian economies (along with oil-rich nations) were the dominant suppliers of capital that fueled the asset price boom in many parts of the world in the early 2000s. It argues that the role of funding costs and a ?liberal? regulatory regime that allowed for an unprecedented expansion of the balance sheets of European banks was no less important. Finally, we describe the aftermath of the ...
Working Paper
Corporate response to distress: evidence from the Asian financial crisis
This paper provides a comprehensive examination of the ways in which companies respond to a country-wide crisis through the restructuring of their assets (through asset sales, mergers or liquidations) or liabilities. We find the restructuring of liabilities to be the most common type of response. On the other hand, we argue that firms may be reluctant to engage in major asset sales due to substantial price discounts that need to be applied to these transactions during the crisis. In fact, we document that transaction multiples dropped by 40% during the crisis, compared to a pre-crisis period. ...
Journal Article
Recent movements in the Baltic Dry Index
Journal Article
A closer look at house price indexes
At least early in the financial crisis, the high rate of foreclosures seemed to be due more to households' overreaching than to predatory lending. A disproportionate number of those being foreclosed on were well-educated, well-off and relatively young people.